Business

Prinesha Naidoo
4 minute read
17 Jun 2016
11:43 am

Rich South Africans paying up for foreign citizenship

Prinesha Naidoo

If you have between R50m and R120m lying around, you can buy yourself 'Plan B' citizenship abroad.

Picture: Courtesy of Moneyweb

The number of ultra high net worth South Africans seeking foreign citizenship or residence permits by investment has doubled in 2016, says Henley & Partners.

“It’s not like all those years ago when South Africans left to Australia. Now, South Africans are realising they don’t physically have to pack up and go. They can make wise offshore investments and gain foreign passports and/or residence, and give their families more security at the same time,” said Sandra Woest, a senior partner at Henley & Partners local office.

According to Woest, 300 to 350 South Africans have approached the citizenship and residence planning firm over the past 12 months. She said this was an increase on the previous year’s queries but would not be drawn into detail as to how many people completed the process by securing either citizenship or residency abroad. She said 95% of the people she dealt with did not wish to leave South Africa but rather view gaining foreign citizenship or residency as a “plan B” and a form of security against political and economic uncertainty.

“The weak rand is scaring people and, while they know they will lose out by purchasing property overseas in euros now, people are going ahead, because having property, valued in a stable currency such as euros, gives them some security,” she said.

South Africans are most interested in the citizenship programmes on offer by the Malta and Cyprus and the Portugal residence programme, all of which offer some degree of access to the European Union, she said.

To gain Maltese citizenship, South Africans would have to make a real estate purchase of €350 000 (R5.9 million) or take a €16 000 annual property lease for a period of five years, purchase a €150 000 five-year government bond, and make a €650 000 government donation. She said the average South African family would have to lay out R1.2 million to R1.4 million, of which R500 000 would be returned after five years, in order to secure citizenship in the island nation.

“Last year, I would have said people would need a net asset value of R100 million to consider Malta, but now, with the weak rand, people need to have a net asset value of at least R120 million,” Woest added.

South Africans would require a similar net asset value to gain citizenship by investment in Cyprus. She said the Cypriot government required an initial real estate purchase of €2.5 million, the biggest portion of which could be sold off for up to €2 million after three years.

Woest said Portugal’s Golden Residence Permit Programme, the most successful of its kind, required the lowest capital layout. A real estate purchase of €500 000 was required to qualify for a five-year residence permit with a Schengen card. Permanent residency could be acquired after the fifth year and residence holders could also become eligible for Portuguese citizenship, provided they met certain criteria, including basic language skills.

“Portugal is a good plan B for South Africans who maybe can’t afford citizenship in Malta or Cyprus or wish to spend half of their time abroad, but it must be very well managed because of the requirements to gain citizenship in year six or thereafter,” she said, adding that South Africans with a net asset value of around R50 million cvould consider the Portuguese residency programme.

According to data from the Portuguese government, 82 South Africans gained residency in the country between October 2012, when the programme was introduced, and March 31 2016.  South Africans came in fourth place behind the Chinese, Brazilians and Russians, in terms of residence permits gained over the period.

Woest said a stronger nationality with a second citizenship or residency permit gave people security.

According to the firm’s latest Quality of Nationality Index – a measure of internal factors such as the scale of an economy, human development and peace, and stability as well as external factors such as visa-free travel and the ability to work and settle abroad – South Africa ranked 89th out of 161 countries and territories.

South Africa scored 30% in 2015, 0.2% lower than the previous year, and below the global average of 38.7%. Woest said the country lagged behind due to a lack of travel and settlement freedom and a relatively low ranking of 116 out of 188 on the UN’s Human Development Index. South Africa, did however, score highly in terms of economic strength, having placed 29th out of 179 countries on the World Bank GDP ranking. Germany, which led the Quality of Nationality Index for the fifth consecutive year, scored 83.1%, and the Democratic Republic of Congo came in last place, with 14.3%. Malta, Cyprus and Portugal place in the top 25.

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